Four Surprising Trends Sighted by Compliance Management System Experts

Continuity, a provider of compliance management systems and expertise, recently shared its perspective on surprises in 2018 and what lies in store for 2019.

According to Continuity’s Regulatory Operations Center. the four trends of 2018 were:

Regulatory “relief” was anything but relaxing. 2018 saw a record number of regulatory pronouncements issued that affected banks and credit unions. The 265 regulatory pronouncements issued in 2018 reflected a 20% increase from the 220 issued in 2017.

Banks and credit unions are both still spending too much on compliance. Because regulatory relief didn’t reduce regulatory activity, the work of managing regulatory change remained burdensome and pervasive. A number of “red flags” across multiple organizations shows that compliance operations failed to gain efficiency. Most FIs still rely too heavily on human effort and too little on technology adoption, resulting in inconsistent outcomes flowing from duplicative or redundant business processes.

Enforcement actions with fines and penalties against individual directors and officers rose sharply. An increase of 500% over the prior year included a dramatic spike in the number of actions taken against individual officers for wrongdoing, even in cases where no action was taken against their financial institution. The trend of director-focused actions persisted, with fines escalating into the hundreds of thousands of dollars per incident.

Changes in executive role expectations for risk and compliance officers are transforming the skill sets needed for peak performance.Today’s regulatory environment demands incumbents with modern proficiencies, in areas like data literacy, business intelligence and technology implementation and integration. The domain is no longer ruled by box-checkers or grammar-sticklers, and even those with MBAs or JDs now find themselves falling behind their more tech-savvy peers who understand how to leverage and rely upon regulatory technology and business intelligence tools.

One of the challenges for small to midsize banks is that some of the requirements on regulation can cost almost as much for a smaller bank than the nation’s largest banks that benefit from scale. It is somewhat ironic given the fact that some of the regulations were implemented due to red flags, perceived or real, that lawmakers noticed from the larger institutions.

The point that Continuity makes is valid that compliance costs a great deal of money, especially for smaller players. Technology can help, but even more important is that executives and board members at Banks need more than just a working knowledge of compliance issues and the technology needed to address them. It is mission critical, as an executive does not just want to rely on a Chief Compliance Officer. He or she needs to be able to ask the right questions. As per their findings, the need goes beyond just being competitive to the uncomfortable topic of liability. Compliance needs to be worked into the bank’s overall strategy.